Question 1

The capital budget is the most detailed and most used budget a firm prepares.

Accepted Answer

A) True 
 B)False

Question 2

A firm's short-term financial forecast provides an estimate of sales.

Accepted Answer

A) True 
 B)False

Question 3

Victoria Nursery offers customers credit terms of 3/15 net 30.This gives customers a:

Accepted Answer

A)  fifteen percent discount if they pay in three days.
B)  three percent discount if they pay in thirty days.
C)  three percent discount if they pay in fifteen days.
D)  fifteen percent discount if they pay in thirty days.E) A) and D)
F) C) and D)

Question 4

Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks.

Accepted Answer

A) True 
 B)False

Question 5

Financial managers are responsible for controlling cash flows.

Accepted Answer

A) True 
 B)False

Question 6

___________ is a source of long-term equity financing.

Accepted Answer

A)  A bank loan
B)  Commercial paper
C)  Selling bonds
D)  Venture capitalE) None of the above
F) B) and C)

Question 7

By borrowing $10 million from the First Newfoundland Bank,Cain Industries utilizes

Accepted Answer

A)  equity financing.
B)  debt financing.
C)  liability funding.
D)  asset funding.E) All of the above
F) C) and D)

Question 8

New World Chemical does not offer customers a cash discount for early payment of their accounts receivable.As a result,most customers wait to pay their bill on the last day before late penalties are charged.These customers apparently understand the:

Accepted Answer

A)  time value of money.
B)  benefits of tax deductible expenses.
C)  financial community's perception of equity financing.
D)  government's regulations of the chemical industry.E) All of the above
F) B) and D)

Question 9

To reduce the time and expense of collecting accounts receivables,some firms:

Accepted Answer

A)  extend credit to new customers.
B)  offer extended payment plans to existing customers.
C)  adopt a just-in-time inventory policy.
D)  accept bank-issued credit cards.E) None of the above
F) B) and C)

Question 10

Which of the following is the most popular way of raising cash among small businesses?

Accepted Answer

A)  factoring
B)  commercial paper
C)  line of credit
D)  revolving credit agreementE) None of the above
F) A) and C)

Question 11

A budget reflects management's expectations for revenues and required resources.

Accepted Answer

A) True 
 B)False

Question 12

The first step in financial planning is to develop a budget to better control costs.

Accepted Answer

A) True 
 B)False

Question 13

Describe some of the operational needs for which funds must be readily available to a company.

Accepted Answer

Managing day-by-day needs of t...

Question 14

Which of the following suggests that higher interest rates are charged to high risk borrowers?

Accepted Answer

A)  Direct relationship principle
B)  Compensating balance concept
C)  Risk/return tradeoff
D)  Cost-benefit analysisE) B) and D)
F) A) and D)

Question 15

Firms can acquire funds through borrowing,selling ownership,or retaining earnings.

Accepted Answer

A) True 
 B)False

Question 16

In an effort to reduce the risk of lending money,banks require that some borrowers pledge certain types of assets as collateral.

Accepted Answer

A) True 
 B)False

Question 17

A cash budget helps managers anticipate borrowing,debt repayment,operating expenses,and short-term investment opportunities.

Accepted Answer

A) True 
 B)False

Question 18

The managers of Dakoti Clothing regularly compare their actual profits with the firm's projected profits.When deviations occur,the managers use the feedback to take corrective action when necessary.The management of Dakoti Clothing is exercising financial:

Accepted Answer

A)  derivatives.
B)  control.
C)  planning.
D)  budgeting.E) C) and D)
F) A) and B)

Question 19

As a result of cash flow shortages,Kellco Department Stores has fallen behind in payments to suppliers.Some suppliers are withholding shipments to Kelco until they receive payments on overdue accounts.To meet their immediate needs,Kellco Department Stores should utilize:

Accepted Answer

A)  vulture capital.
B)  long-term financing.
C)  contingency capital.
D)  short-term financing.E) None of the above
F) B) and D)

Question 20

The time value of a dollar reflects the interest that could be earned by investing that dollar.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Management

Describe some of the operational needs for which funds must be readily available to a company.

Correct AnswerverifiedManaging day-by-day needs of t...View AnswerShow Answer

Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks.

Correct AnswerverifiedShow Answer

___________ is a source of long-term equity financing.

Correct AnswerverifiedShow Answer

The first step in financial planning is to develop a budget to better control costs.

Correct AnswerverifiedShow Answer

Which of the following suggests that higher interest rates are charged to high risk borrowers?

Correct AnswerverifiedShow Answer

As a result of cash flow shortages,Kellco Department Stores has fallen behind in payments to suppliers.Some suppliers are withholding shipments to Kelco until they receive payments on overdue accounts.To meet their immediate needs,Kellco Department Stores should utilize:

Correct AnswerverifiedShow Answer

A firm's short-term financial forecast provides an estimate of sales.

Correct AnswerverifiedShow Answer

New World Chemical does not offer customers a cash discount for early payment of their accounts receivable.As a result,most customers wait to pay their bill on the last day before late penalties are charged.These customers apparently understand the:

Correct AnswerverifiedShow Answer

To reduce the time and expense of collecting accounts receivables,some firms:

Correct AnswerverifiedShow Answer

Firms can acquire funds through borrowing,selling ownership,or retaining earnings.

Correct AnswerverifiedShow Answer

The managers of Dakoti Clothing regularly compare their actual profits with the firm's projected profits.When deviations occur,the managers use the feedback to take corrective action when necessary.The management of Dakoti Clothing is exercising financial:

Correct AnswerverifiedShow Answer

Financial managers are responsible for controlling cash flows.

Correct AnswerverifiedShow Answer

By borrowing $10 million from the First Newfoundland Bank,Cain Industries utilizes

Correct AnswerverifiedShow Answer

The capital budget is the most detailed and most used budget a firm prepares.

Correct AnswerverifiedShow Answer

A cash budget helps managers anticipate borrowing,debt repayment,operating expenses,and short-term investment opportunities.

Correct AnswerverifiedShow Answer

In an effort to reduce the risk of lending money,banks require that some borrowers pledge certain types of assets as collateral.

Correct AnswerverifiedShow Answer

Victoria Nursery offers customers credit terms of 3/15 net 30.This gives customers a:

Correct AnswerverifiedShow Answer

The time value of a dollar reflects the interest that could be earned by investing that dollar.

Correct AnswerverifiedShow Answer

Which of the following is the most popular way of raising cash among small businesses?

Correct AnswerverifiedShow Answer

A budget reflects management's expectations for revenues and required resources.

Correct AnswerverifiedShow Answer

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